Suppose Mary receives an $8,000 loan from First National Bank. Mary repays $8,480 to First National Bank at the end of one year. Assuming the simple calculation of interest, the interest rate on Mary's loan was:
A) 8.00%
B) $480
C) 6.00%
D) 5.66%

Question

Quizplus · Accepted Answer

The interest on Mary's loan can be calculated using the formula:

Interest = Principal x Rate x Time

where Principal is the amount borrowed, Rate is the interest rate and Time is the time period for which the loan was taken.

In this case, the Principal is $8,000, Time is 1 year, and the amount repaid (including interest) is $8,480.

Therefore, Interest = $8,480 - $8,000 = $480

Using the formula for interest, we can find the interest rate as:

Rate = (Interest / Principal) x 100 x (1 / Time)

Substituting the values we get,

Rate = (480 / 8000) x 100 x (1/1) = 6.00%

Hence, the interest rate on Mary's loan was 6.00%.

Suppose Mary Receives an $8,000 Loan from First National Bank